It wasn’t that long ago that we were talking about post-holiday returns and what apparel retailers could do to tackle them. Today, the problem of holiday returns seems like small potatoes compared with the impact of COVID-19. Apparel retailers are facing a mounting pile of overstock, unlike anything they’ve seen before.

Apparel has been disproportionately affected during the pandemic. Consumers are using their limited funds to purchase items they deemed essential. What’s more, in the wake of stay-at-home orders by governments across the globe, millions are working and socializing from home, with little need for additional clothing or accessories.

With brick-and-mortar shops closed worldwide, most businesses are being forced to rely solely on online orders. Yet with the shift in consumer priorities, demand for clothing has fallen considerably. U.S. apparel sales in March dropped by more than half. In response, many within the industry are looking seriously at new ways of attracting orders, and mitigating the impact of this unexpected change in circumstances.

Many are using the opportunity to diversify operations. In a bid to entice shoppers into making online purchases, most brands are launching mass clothing sales. The number of discounts has increased by 18% across the country. The hope is that cheaper prices will go at least some ways toward shifting the overstock.

The number of new styles making their way onto the market has also fallen drastically, as businesses look to cut back on costs wherever possible. Figures in April show new fashions falling by a whopping 77% year on year, as retailers struggle with high stock levels within their warehouses. More brands are likely to follow suit, by cancelling or halting orders of new summer inventory.

Over the coming months, we can expect to see retailers and brands explore the different avenues through which they can offset loss and offload unprecedented amounts of apparel. The problem is that traditional channels — including deep discounting, sending to an outlet store, or selling to an off-price retailer — won’t be able to accommodate all of the inventory.

In a normal market, apparel retailers and brands would typically sell excess merchandise to off-price retailers. But with those entities also being closed, they’re unlikely to have the cash or capacity to handle the inventory.

Moreover, packing up seasonal apparel and storing it for next year won’t necessarily work either. That’s especially the case for trendy and fast-fashion styles, which have incredibly short shelf lives and won’t be saleable the following year.

All of these factors, combined with consumer expectations of a sustainable fashion industry, are placing an awful lot of pressure on apparel retailers. Their need to find an answer is becoming critical. How, in the wake of COVID-19, how they you build a scalable and sustainable disposition channel for unprecedented amounts of excess inventory?

Nine of the top 10 U.S. retailers are currently using branded, online auction B2B marketplaces to sell their excess and returned inventory. These marketplaces are customized, integrated, and scaled based on the retailer’s unique needs. Think of it as your own storefront to sell returned, excess, or other b-stock inventory. They also allow total control over who’s buying the inventory, and how it enters the secondary market.

If managed correctly, costs can be drastically offset for returned or excess inventory, compared with the expense of reprocessing items back onto the shelf or returning them to the vendor. With an online auction, where specifically targeted buyers compete to buy your merchandise, pricing goes up. At the same time, being able to control who sees your wares and who can buy them guarantees exposure to the right buyers and keeps your brand image secure, allowing for no confusion between primary and secondary stock.

B2B platforms lean toward having a large base made up of the right buyers. They allows retailers to move much larger volumes of stock regardless of season, product category or price, guaranteeing the rapid creation of shelf space.

Most of these sites also have built-in market intelligence and automation features, making the liquidation process faster and more efficient, with no need for spreadsheets, faxing or phone calls. And with the auction format, you’ll be extracting the buyer’s highest willingness to pay, as well as receiving true market pricing.

Last but not least, customer sentiments around sustainability are addressed, as products bypass landfill. There’s a robust buyer base for nearly every product, from salvage and discount store owners to online sellers, mom-and-pop shops, refurbishers and exporters, allowing for the lifecycle of an item to be extended.

In addition to using this type of platform to sell their liquidation inventory, retailers are applying data to achieve their goals, be it recovery, velocity or brand control. The smallest adjustments can drive substantially better results. Lot optimization, low start prices, accurate manifests, targeted marketing and other strategies all contribute to better pricing.

The apparel resale market was already on the rise before COVID-19 came along; last year clothing accounted for 49% of the total resale market. The secondary market for apparel is estimated to reach $51 billion by 2023. Given that the apparel industry has one of the highest return rates in retail — and now, one of the highest rates of overstock — there’s a big opportunity for selling returned and excess clothing on the secondary market. Whether the retailer’s goal is to offset loss, move inventory, or ensure a sustainable channel for returned goods, an online marketplace is an effective solution.

Eric Moriarty is vice president at B-Stock.

Source: Supply Chain Brain – 15^th June, 2020

Image by Steve Adcock from Pixabay